China is one of Nvidia’s largest markets, particularly for data centers, gaming and artificial intelligence applications.
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Two Chinese nationals in California have been arrested and charged with the illegal shipment of tens of millions of dollars‘ worth of AI chips, including those made by Nvidia, the Department of Justice said Tuesday.
Chuan Geng, 28, and Shiwei Yang, 28, exported the sensitive chips and other technology to China from October 2022 through July 2025 without obtaining the required licenses, the DOJ said.
The illicit shipments included Nvidia’s H100 general processing units, according to a criminal complaint provided to CNBC. The H100 is among the U.S. chipmaker’s most cutting-edge chips used in artificial intelligence applications.
The Department of Commerce has placed such chips under export controls since 2022 as part of broader efforts by the U.S. to restrict China’s access to the most advanced semiconductor technology.
This case demonstrates that smuggling is a “nonstarter,” Nvidia told CNBC. “We primarily sell our products to well-known partners, including OEMs, who help us ensure that all sales comply with U.S. export control rules.”
“Even relatively small exporters and shipments are subject to thorough review and scrutiny, and any diverted products would have no service, support, or updates,” the chipmaker added.
Geng and Yang’s California-based company, ALX Solutions, had been founded shortly after the U.S. chip controls first came into place.
According to the DOJ, law enforcement searched ALX Solutions’ office and seized phones belonging to Geng and Yang, which revealed incriminating communications between the defendants, including those about evading U.S. export laws by shipping sensitive chips to China through Malaysia.
The review also showed that in December 2024, ALX Solutions made over 20 shipments from the U.S. to shipping and freight-forwarding companies in Singapore and Malaysia, which the DOJ said are commonly used as transshipment points to conceal illicit shipments to China.
Meanwhile, the department said that ALX Solutions was not paid by entities they purportedly exported goods to, instead receiving numerous payments from companies based in Hong Kong and China.
The U.S. Department of Commerce’s Bureau of Industry and Security and the FBI are continuing to investigate the matter.
Geng and Yang have been charged with violating the Export Control Reform Act, a felony that carries a maximum penalty of 20 years in federal prison. Yang was also found to be residing in the U.S. illegally after overstaying her visa.
The smuggling of advanced microchips has become a growing concern in Washington. According to a report from the Financial Times last month, at least $1 billion worth of Nvidia’s chips entered China after Donald Trump tightened chip export controls earlier this year.
In response to the report, Nvidia had said that data centers built with smuggled chips were a “losing proposition” and that it does not support unauthorized products.
In response to pressure from the U.S., Malaysia said last month that it would begin requiring trade permits for advanced AI chips sourced from the U.S.